RBI Bars Paytm Payments Bank from Accepting Deposits and Credit Transactions Beyond February 29

In a significant development, the Reserve Bank of India (RBI) has ordered Paytm Payments Bank Ltd to cease accepting deposits and conducting credit transactions, including top-ups, in customer accounts or prepaid instruments linked to those accounts after February 29. The central bank has also terminated the nodal accounts of Paytm’s parent company, One97 Communications Ltd., and Paytm Payments Bank Ltd., citing “persistent non-compliances and continued material supervisory concerns in the bank.”

This move follows a directive issued in March 2022, when the RBI had instructed Paytm Payments Bank Ltd to halt the onboarding of new customers “with immediate effect.” The recent order further tightens the regulatory grip on the banking operations of Paytm, reflecting concerns raised after a comprehensive audit of its systems by external parties.

Despite the restrictions on accepting new deposits or facilitating credit transactions, customers are allowed to continue utilizing existing balances in their accounts, including savings and current accounts, “without restriction” up to their available limit, according to the RBI order. However, the central bank’s action has not affected Paytm’s Unified Payment Interface (UPI) arm, ensuring that users can still employ Paytm as a digital payment option as long as their account is linked to an external bank.

The Reserve Bank’s decision comes in the wake of what it describes as “persistent non-compliances” by Paytm Payments Bank Ltd. The order suggests that despite the March 2022 directive, the concerns flagged during the audit have not been adequately addressed, leading to this more stringent action.

Notably, Paytm has been a major player in the digital payment and banking sector, offering a range of financial services to its extensive user base. The company has not responded to the recent RBI directive at the time of writing, and the founder/CEO, Vijay Shekhar Sharma, has not issued any statements on the matter.

In the context of the banking operations being the focal point of the RBI’s action, Paytm users can still rely on the platform for digital transactions, provided their accounts are linked to external banks. This development is likely to prompt industry watchers and users alike to closely monitor the unfolding situation and its potential implications for the fintech giant.

Sources By Agencies